Unemployment Dips 0.1% Despite Slower Job Growth

Despite a continuing slump in manufacturing and construction jobs, the nation’s unemployment rate edged down 0.1% in June to 5.2% of the work force, the Labor Department said Friday.

Although the latest figures suggested that the economy has not emerged from its lengthy slowdown, analysts said the Federal Reserve is not expected to move quickly to nudge interest rates down to stimulate growth.

“There’s no real zip in this economy,” said Elliott Platt of Donaldson, Lufkin & Jenrette Securities in New York, “but you don’t have the combination of recessionary forces to drag it into negative territory, either.”

Indeed, a sharp upward revision in May’s job figures--showing that about 155,000 jobs were added outside the government work force instead of the original estimate of 19,000--convinced some investors on Wall Street that the economy has been somewhat stronger than they thought.

The result was a selloff in the bond market, where traders had been hoping that a weak employment report would persuade the Federal Reserve to cut short-term interest rates after six months of holding monetary policy steady.

“This report will not force the Fed to ease,” said Robert Dederick, chief economist at Northern Trust Co. of Chicago. “The month before was revised up, and unemployment was lower.”

The Fed is expected to wait for evidence later this month that should indicate whether consumers will boost spending enough to sustain a recent production upswing. Retail sales have slumped for three months in a row, an unprecedented downturn for a non-recessionary period.

But some economists believe that the Commerce Department’s estimates of a sharp spending falloff are mistaken. Government economic reports are frequently revised as experts gather more data, often providing a sharply different portrait of the economy than the first evidence suggests.

A separate calculation of unemployment that includes military forces stationed in the United States fell to 5.1% in June from 5.3% in May.

Businesses added a modest 97,000 payroll jobs last month, according to the Labor Department report. But overall non-farm employment rose by just 40,000, largely because the Census Bureau began layoffs of hundreds of thousands of extra workers it had hired for the once-a-decade population count.

The 40,000 increase in jobs came on top of an explosive employment gain of 356,000 in May, more than double the 164,000 first reported. Roughly 200,000 of the jobs added in May were attributable to the hiring of census workers.

In California, the jobless rate fell to 4.9% from 5.4% for the previous two months.

Unemployment has remained remarkably steady for roughly two years, but job growth has slowed to just half the pace of a year ago.

Only about 290,000 Americans have entered the work force so far this year, said Janet Norwood, commissioner of the Bureau of Labor Statistics, compared to 1.5 million who either found jobs or were actively looking during the same period last year.

Most of the private sector job growth in recent months has occurred in service industries, while the nation’s manufacturing sector has shed jobs for more than a year.

Factory payrolls lost another 31,000 jobs in June. It was the 14th time in 15 months that manufacturing employment has fallen, cutting roughly 335,000 jobs from the post-recession peak in March, 1989. Construction employment fell by 14,000, the fourth monthly decline in a row, reflecting a weak housing market.

“The apparent steadiness of the economy is an illusion,” complained Lawrence A. Hunter, an economist at the U.S. Chamber of Commerce. “Underlying two years of stable unemployment rates are significant job losses in manufacturing and an increase in the number of discouraged workers who have dropped out of the job market.”

Despite the weakness in the June job market, however, other clues in the Labor Department report indicated that the U.S. economy might be regaining some momentum.

The average manufacturing work week remained at a relatively high 41 hours for the second month, and overtime held at 3.8 hours, suggesting that factories have started to boost output.

Meanwhile, labor costs--which some central bankers worry may fuel higher inflation--continued to rise, with average hourly earnings moving up to $10.01 in June from $9.98 in May.

“Given their worries about inflation being stuck at an unacceptably high level, the Fed is likely to do nothing to cut rates,” said David Levine, chief economist at Sanford C. Bernstein & Co. in New York.

UNEMPLOYMENT Percent of work force, seasonally adjusted June, ‘90: 5.2% May, ‘90: 5.3% June, ‘89: 5.3% Source: Labor Department